It is virtually impossible to listen to or read the news these days without hearing about carbon taxes, the phase out of coal fired electricity, and the renewables that are to replace them. After years of slow growth in the renewables sector (particularly solar) it seems that we are on the brink of a revolution.
I have received several calls and emails asking about the impacts to the Agricultural sector; is this an opportunity for your Ag business or an additional cost? As always, it depends and it is complicated.
What we know:
- Electricity prices in the wholesale markets have been volatile in the past number of years in Alberta. If you are a farming or industrial consumer not on a fixed price contract, you have seen this. The swings on the hourly pool price have been considerable. From highs of $999/ MWh to the record lows of $20/MWh seen more recently.
- The Alberta Climate Action Plan outlines a high level strategy to replace 1/3 of coal fired power generation with natural gas and 2/3 with renewables and implement an increased carbon tax of $20 -30 / tonne from 2017. This will impact the cost of natural gas and electricity consumption for customers in Alberta.
- Alberta Agriculture has incentives available for solar photovoltaic installations on qualifying farm properties through Growing Forward. The maximum incentive is $0.6 /installed watt up to a maximum of $50,000. This is a one time grant, not an ongoing payment.
- The federal budget has outlined a number of policies related to carbon footprint reductions, energy efficiency, renewable energy and electrical grid optimization The details of these programs are not yet available.
- The Premiers agreed on a Climate Plan Framework during their recent Vancouver convention. This includes a pan Canadian plan to price carbon. The details are yet to be announced.
- In May the Alberta Electric System Operator (AESO) is expected to come forward with more details on an incentive program for renewable energy projects in Alberta.
- Alberta will start to lose a portion of its low cost, coal-fired electricity generation by 2018, due to existing legislation.
As a result of these factors, there has been a wave of solar projects
joining the AESO interconnection queue. There has been a renewed interest in the renewables industry and a lot of different industry stakeholders are watching this space. What we also know, is that somehow the costs of a carbon tax increase will be passed on to consumers. How exactly this will function is not known but we do know that there will be cost recovery.
The key take home is we can expect that the prices of gas and power in the province will rise to cover the greening of the grid. This will happen quickly, as we are already seeing the wholesale forward market prices trading for 2017, and beyond, rising in anticipation of this.
What we don’t know:
As you can see from the points above, a lot of the details of the plans are yet to be disclosed.
If energy costs are a significant factor in your Ag business operating costs, we can help you to devise a strategy to protect yourself from rising costs and evaluate the renewables opportunity. Contact us for more details.